The business behind the show

Spotify's Daniel Ek and the music 'dinosaurs'

February 10, 2012 | 3:35
pm

Less than seven months after launching his digital music service in the U.S., Spotify's Daniel Ek found himself rubbing elbows with the upper echelon of the record industry executives who have descended on Los Angeles for this Sunday’s Grammy Awards.

The 28-year-old Swedish entrepreneur with a boyish face that still hints of baby fat on Friday afternoon addressed a ballroom full of power attorneys in Brooks Brothers and Armani suits — essentially schooling them on the brave new world of digital music.

Ek, pictured above on the right, boldly predicted that revenue from streaming services such as Spotify will in two years return as much revenue to the industry as iTunes does today. Since launching its service in 2008, the Stockholm-based company has remunerated more than $200 million, roughly 70% of its revenue, to labels and publishers.

“The value of music is not $15 billion,” an estimate of annual music sales, Ek told an audience of several hundred at the Grammy Foundation’s Entertainment Law Initiative luncheon as they dined on endive dressed in raspberry vinaigrette. “It’s worth much, much more than that.”

Spotify’s service has caught on worldwide with more than 10 million listeners who tune in at least once a month — 3 million of whom pay around $5 to $15 a month to access premium versions.

Though music labels have embraced Spotify's unusual approach — of offering a generous free version that gives users online access to millions of tracks on demand — the company continues to face skepticism from some bands and musicians who fear that streaming music services eat into album sales.

Bands such as Coldplay and the Black Keys, and performers like Mac Miller, have opted to withhold their new albums from streaming services such as Spotify — at least for the first few weeks after the albums’ releases. (This week some of former Beatle Paul McCartney's songs also became unavailable on Spotify, an apparent result of contractual requirements not related specifically to the streaming service.) Ek emphatically disagreed with those decisions.

“There is no cannibalization,” Ek said before a packed audience in the Crystal Ballroom of the Beverly Hills Hotel. “At the end of the day, I want the music industry to be larger than what it is today. And I believe that the two models [streaming and sales] can co-exist side by side."

As if to punctuate a contrast with Ek's youthful approach, John Branca, veteran counselor to the stars, followed him on stage with the following remark that drew chuckles from the crowd:

"It’s a popular belief that the music industry is over, that it’s seen better days. Some would say that we lawyers are the dinosaurs of the legal landscape, that paleontology is a better subject for us and that a better forum for this would be the La Brea Tar Pits."

As a prominent music attorney, Branca's clients have included the Beach Boys, the Doors, the Rolling Stones and Carlos Santana. He is also the executor of the Michael Jackson estate.

Branca summed up the challenge for the music industry, pointing out that many of music's greatest stars created their music "before the digital age."

"How do we present these great artists to a new generation of fans?" Branca said.